Arbor’s shares dive after short seller report

For the second time in a matter of months, Arbor Realty Trust’s shares took a hit as a result of a Viceroy Research report.

The multifamily lender’s shares declined 4.9 percent on Thursday, Bloomberg reported, following the release of the short seller’s report. After opening the day at $13.33 per share, Arbor’s stock closed at $12.83, dropping as low as $12.68 before the small recovery at day’s end.

On Thursday, Viceroy published a report accusing Arbor of fraud. The short seller claimed an off-balance sheet Arbor-funded entity acquired properties which Arbor foreclosed on, which supposedly would’ve allowed Arbor to avoid writing down its loans on said properties.

Viceroy specifically noted Westchase Houston, a group of apartment buildings, in its report. Arbor allegedly foreclosed on the portfolio before the off-balance sheet entity acquired it, Viceroy claimed, adding that Arbor then failed to disclose the transaction in its latest quarterly results.

In a press release following Viceroy’s report, Arbor claimed it was comfortable with its audited financial statements and would not respond to short seller reports. Chief financial officer Paul Elenio added to Bloomberg that the Westchase Houston transaction happened in the second quarter and would be registered in the second quarter results.

Viceroy has been betting against Arbor since November and has published several reports about the lender. A report from Viceroy in November drove down Arbor’s stock from $13.84 to $12.03, but it recovered afterwards.

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Time will tell if the stock dive for Arbor proves to be temporary once again. As of 10:30 am on Friday, the stock was up 0.7 percent, hitting $12.92 per share.

In the first quarter, the New York-based real estate investment trust modified almost $1.9 billion in loans to help borrowers facing “financial difficulties,” it recently disclosed. 

Arbor modified 39 multifamily bridge loans by extending maturity dates and giving borrowers temporary rate relief. In exchange, some borrowers agreed to pay down principal, buy new rate caps and deposit more cash into reserves for renovations or interest rate jumps.

— Holden Walter-Warner